Ameriprise 2009 Annual Report Download - page 155

also make annual discretionary variable match contributions, which are based primarily on the performance of the Company. Prior to
May 2009, the Company also made contributions equal to 1% of base pay each pay period, which were automatically invested in the
Ameriprise Financial Stock Fund. Effective March 1, 2010, the Company will no longer make a variable match and will modify its fixed
match. The new fixed match will be 100% of the first 5% of eligible compensation an employee contributes on a pretax or Roth 401(k)
basis for each annual period. The Company also expanded the definition of eligible compensation to be consistent with the Retirement
Plan.
Under the 401(k) Plan, employees become eligible for contributions under the plan on the first pay period following 60 days of service.
Effective March 1, 2010, employees will become eligible during the pay period they reach 60 days of service. For plan years beginning in
2007, fixed and variable match contributions and stock contributions vest on a five-year graded schedule of 20% per year of service. The
Company’s defined contribution plan expense was $16 million, $22 million and $33 million in 2009, 2008 and 2007, respectively.
Threadneedle Profit Sharing Arrangements
On an annual basis, Threadneedle employees are eligible for two profit sharing arrangements: (i) a profit sharing plan for all employees
based on individual performance criteria, and (ii) an equity incentive plan (‘‘EIP’’) for certain key personnel. Awards under the EIP were
first made in April 2009; prior awards were made under the equity participation plan (‘‘EPP’’).
This employee profit sharing plan provides for profit sharing of 30% based on an internally defined recurring pretax operating income
measure for Threadneedle, which primarily includes pretax income related to investment management services and investment portfolio
income excluding gains and losses on asset disposals, certain reorganization expenses, equity participation plan expenses and other
non-recurring expenses. Compensation expense related to the employee profit sharing plan was $32 million, $49 million and $84 million
in 2009, 2008 and 2007, respectively.
The EIP and EPP are cash award programs for certain key personnel who are granted awards based on a formula tied to Threadneedle’s
financial performance. The EIP provides for 100% vesting after three years, with required cash-out after six years. The EPP provides for
50% vesting after three years and 50% vesting after four years, with required cash-out after five years. All awards are settled in cash, based
on a value as determined by an annual independent valuation of Threadneedle’s fair market value. The value of the award is recognized as
compensation expense evenly over the vesting periods. However, each year’s EIP and EPP expense is adjusted to reflect Threadneedle’s
current valuation. Increases or decreases in the value of vested awards are recognized immediately. Increases or decreases in the value of
unvested awards are recognized over the remaining vesting periods. Compensation expense (benefit) related to the EIP and the EPP was
$(4) million, $15 million and $42 million for the years ended December 31, 2009, 2008 and 2007, respectively.
20. Derivatives and Hedging Activities
Derivative instruments enable the Company to manage its exposure to various market risks. The value of such instruments is
derived from an underlying variable or multiple variables, including equity, foreign exchange and interest rate indices or prices.
The Company primarily enters into derivative agreements for risk management purposes related to the Company’s products and
operations.
140 ANNUAL REPORT 2009